Image-Nyx merger hits another snag

Image claims breach of merger agreement

The rollercoaster union between Image Entertainment and Nyx Acquisitions took another dip Tuesday when Image notified Nyx that it was in breach of the merger agreement after failing to deposit an additional $500,000 into a business interruption fee trust by Monday.

In turn, Nyx, an affiliate of San Francisco-based Q-Black Llc., said it would submit the funds by the close of the business day Tuesday.

Image said Friday that it would agree to extend to March 20 the merger deadline with Nyx Acquisition in exchange for $500,000 added to the current business interruption fee of $1.8 million.

Under terms of the deal, Image can terminate the merger and collect the $1.8 interruption fee in addition to the aforementioned $500,000 since Nyx failed to deposit the funds on time.

Image shareholders formally approved the acquisition -- originally slated to close Thursday -- which calls for Nyx to pay Image shareholders $2.75 per share in cash ($60.2 million), in addition to outstanding debt, for a total purchase price of $100 million.

Nyx has a final option to extend the closing date to March 26, if it adds another $500,000 to the interruption fee account by March 19.

This extension would bring the interruption fee to $2.8 million.

Wall Street cited concerns about the financial sources for the merger.

"(Nyx) legitimately wants to buy the company; they are just buying time," said an analyst who wished to remain anonymous, citing the ongoing negotiations.

Image shares were down about 14% to $1.21 per share in midday trading.